Market Information and Signaling in Central Bank Operations, or, How Often Should a Central Bank Intervene?

International Monetary Fund

No 1997/028, IMF Working Papers from International Monetary Fund

Abstract: A central bank must decide on the frequency with which it will conduct open market operations and the variability in short-term money market that it will allow. It is shown how the optimal operating procedure balances the value of attaining an immediate target and broadcasting the central bank’s intentions against the informational advantages to the central bank of allowing the free play of market forces to reveal more of the information available to market participants.

Keywords: WP; money market; central banking; monetary policy implementation; open market operations; informational efficiency; market participant; market information; money market interest rates; money market rate; functioning market; money market equilibrium yields change; loss function; market development; market rate; Money markets; Market interest rates; Short term interest rates; Central bank operations (search for similar items in EconPapers)
Pages: 28
Date: 1997-03-01
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